Mortgage Insurers Issues Public Comment on Consumer Financial Protection Bureau Proposed Rules
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USMI appreciates the opportunity to comment on the
USMI understands that changes to the QM framework, including the delay of the mandatory compliance date and extension of the Temporary GSE QM category (GSE Patch), will broadly inform underwriting standards and processes throughout the conventional mortgage market and we appreciate the Bureau's thoughtful analysis of migrating to the new pricing-based General QM definition under the 2020 Final Rule. To best ensure that home-ready borrowers have uninterrupted access to affordable and prudently underwritten conventional mortgages, it is critical that there be a smooth transition to the new General QM standard.
In our comments below, USMI will discuss the following observations and recommendations:
1) The interplay between the proposed extension of the GSE Patch and the
2) The value of increased monitoring and access to mortgage underwriting data for policymakers and housing finance stakeholders.
Interplay between the proposed extension of the GSE Patch and the
If finalized as proposed, mortgage lenders will be permitted to use three different standards to achieve QM status for mortgages associated with applications received prior to
1) The 2013 General QM definition (2013 Final Rule)/4 with a 43 percent debt-to-income (DTI) maximum and use of Appendix Q to calculate borrower income and debt;
2) The 2020 Final Rule's pricing-based definition with a QM threshold of 225 basis points (bps) above the Average Prime
3) The GSE Patch, unless the GSEs exit conservatorship prior to
The extension of the GSE Patch is designed to provide lenders with underwriting flexibility during the 15-month delay of the mandatory compliance date. Some extension in compliance flexibility could prove especially beneficial since some lenders, especially smaller institutions such as community banks and credit unions, might not be ready to comply with the 2020 Final Rule's
It has been especially important for enabling minority, younger millennial, retiree, non-W-2 earner, and low-income borrowers to obtain mortgage financing in the conventional market. Research from the
The
In
Section 5.14(c) of the
Absent further modifications to the PSPAs, effective beginning
As such, USMI urges the Bureau work expeditiously with Treasury Secretary
The value of increased monitoring and access to mortgage underwriting data for policymakers and housing finance stakeholders
As the Bureau moves forward with work on the QM framework, policymakers and housing finance stakeholders would greatly benefit from greater access to mortgage origination data to assess the extent to which the QM standard balances the need for prudent underwriting standards with access to affordable mortgage credit. Waiting five years for a "look back" report to assess how the QM framework operates in the mortgage market creates a significant lag in understanding consumers' access to mortgage credit and homeownership. Expanded access to updated origination data is critical to understanding market trends, access to credit, and the QM credit box - this is especially true in a "rising rate" and "rising price" environment where consumers face significant affordability challenges.
Accordingly, USMI encourages the Bureau to expand access to mortgage origination data, at the investor level, by making the National Mortgage Database (NMDB) available to housing finance stakeholders. The NMDB, which is jointly funded and administered by the Bureau and FHFA, provides quarterly data on a national representative five percent sample of closed-end first-lien mortgages and is intended to aid federal policymakers with monitoring lending products and the health of the mortgage market. The housing finance system would benefit from stakeholders' access to the NMDB and enhanced ability to track access to credit, new products in the market, overall health of mortgage markets, loss mitigation and loan modification programs, and affordable lending. This expansion would allow housing finance stakeholders to constructively engage with the Bureau and other federal agencies regarding mortgage market observations and recommendations following analysis of datapoints such as, but not limited to:
* Borrower demographics (race, ethnicity, age, gender, etc.)
* Geography (location of the property)
* Lending channel (conventional, FHA,
* Loan purpose (purchase, refinance, cash-out refinance, etc.)
* Occupancy (primary residence, second home, investment property, etc.)
* Spread over APOR
* Mortgage performance status
* Loan characteristics
- Loan-to-value (LTV) ratio
- DTI ratio
- Credit score
Thank you again for the opportunity to comment on the Bureau's proposed delay of the mandatory compliance date for the General QM 2020 Final Rule and extension of the GSE Patch. We appreciate your consideration of our perspectives on how to best transition to the new General QM definition while balancing prudent underwriting and credit risk management with borrower access to mortgage finance credit. USMI and our member companies appreciate the Bureau's thorough review of this very important issue and we look forward to continued dialogue as the Bureau proceeds with issuing a final rule and potentially revisiting other elements of the General QM definition.
Questions or requests for additional information may be directed to
Sincerely,
President
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Footnotes:
1/ USMI's membership comprises the following private mortgage insurance companies:
2/ 86 Fed. Reg. 12839 (
3/ 85 Fed. Reg. 86308 (
4/ 78 Fed. Reg. 6408 (
5/ 85 Fed. Reg. 86334 (
6/ The Bureau itself has recognized the value of the GSE Patch for lenders based on its compliance certainty and flexibility, since the GSEs' automated underwriting systems (AUSs) and guides can be easily updated, as well as the immediate liquidity available to mortgage lenders through the robust secondary market that is available for loans originated to the GSEs' standards.
7/
8/ CoreLogic Insights Blogs, "Expiration of the
9/ 86 Fed. Reg. 12850 (
10/
11/ Fannie Mae Letter Agreement (
12/ The Section 5.14(c) prohibits the GSEs' acquisition of certain loans on or after
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The proposed rule can be viewed at: https://www.regulations.gov/document/CFPB-2021-0003-0001
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